Credit-default swaps where protection against loss through default is sold by banks to investors, or vice versa are the keenest indicator of these companies' credit standings in the market.
All these initiatives will further boost loss-given default assumptions and have been cited by rating agencies in decisions to downgrade European bank debt.
If things go south for U.S. steel, into a default situation, the loss on the equity is absorbed by the gains on the CDS, which would pay out the inverse of whatever creditors recover.